Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began
ID: 2395796 • Letter: W
Question
Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows:
Included in WWC’s February 1 Accounts Receivable balance is a $1,800 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $1,800 balance to a note, and Kit Kat signs a 6-month note, at 9% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012.
WWC paid a $650 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
An additional 160 units of inventory are purchased on account by WWC for $12,000 – terms 2/15, n30.
WWC paid Federal Express $320 to have the 160 units of inventory delivered overnight. Delivery occurred on 02/06.
Sales of 130 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30.
The 35 units that were paid for in advance and recorded in January are delivered to the customer.
10 units of the inventory that had been sold on 2/10 are returned to WWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are from the 2/05 purchase.
Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in the current period rather than as a reduction of inventory costs.
$5,000 of rent for January and February was paid. Because all of the rent will soon expire, the February portion of the payment is charged directly to expense.
Collected $9,200 of customers’ Accounts Receivable. Of the $9,200, the discount was taken by customers on $6,500 of account balances; therefore WWC received less than $9,200.
WWC recovered $520 cash from the customer whose account had previously been written off (see 02/18).
A $550 utility bill for February arrived. It is due on March 15 and will be paid then.
Record the $2,000 employee salary that is owed but will be paid March 1.
WWC decides to use the aging method to estimate uncollectible accounts. WWC determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts.
Record one month’s interest earned Kit Kat’s note (see 02/01).
Prepare all February journal entries and adjusting entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
1-b.
Post all February entries (transactions and adjustments) to the T-accounts.
Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows:
Explanation / Answer
Fecha Account name Cargo Abono 01-feb No journal entry is required 02-feb Insurance expenses $ 650 Debts to pay $ 650 Debts to pay $ 650 Cash $ 650 Spending center $ 650 Account of chargeable charges $ 650 05-feb Purchases $ 12,000 Debts to pay $ 12,000 Inventory $ 12,000 inventory variation $ 12,000 05-feb Other management expenses $ 320 Debts to pay $ 320 Debts to pay $ 320 Cash $ 320 Expense center $ 320 Imputable accounts $ 320 10-feb Accounts receivable $ 3,900 Sales $ 3,900 Cost for Sales $ 3,900 Inventory $ 3,900 15-feb Sales $ 4,950 Advances Received $ 4,950 15-feb Inventory $ 300 Cost of inventory $ 300 Sales $ 300 Accounts Receivable $ 300 16-feb Employee Salary $ 2,000 Salary to be paid $ 2,000 Salary to be paid $ 2,000 cash $ 2,000 Expense center $ 2,000 Imputable accounts $ 2,000 17-feb No journal entry is required 18-feb No journal entry is required 19-feb Rental costs $ 2,500 Debts to pay $ 2,500 Debts to pay $ 2,500 Cash $ 2,500 Expense center $ 2,500 Imputable accounts $ 2,500 19-feb Cash $ 6,500 Discounts Granted $ 2,700 Accounts receivable $ 9,200 26-feb Cash $ 520 Accounts receivable $ 520 27-feb Service Expense $ 550 Debts to pay $ 550 Expense center $ 550 Imputable accounts $ 550 28-feb Personnel expenses - Shareholders $ 650 Dividends payable $ 650 Dividends payable $ 650 Cash $ 650 Expense center $ 650 Imputable accounts $ 650 29-feb Employee Salary $ 2,000 Salary to be paid $ 2,000 Expense center $ 2,000 Imputable accounts $ 2,000 29-feb Interest expenses of the pagare $ 160 Accrued interest $ 160 Expense center $ 160 Imputable accounts $ 160 29-feb Accounts receivable $ 13.5 Other Management Income - interests $ 13.5 29-feb Doubtful collection account $ 114.4 accounts receivable $ 114.4 Efectivo Cuentas por Cobrar Cobranza dudusa Inventario $ 20,420 $ 650 $ 11,450 $ 300 -$ 1,500 $ 3,600 $ 3,900 $ 6,500 $ 320 $ 3,900 $ 9,200 -$ 114.4 $ 520 $ 2,000 $ 13.5 $ 520 Anticipos Recibidos Cuentas por pagar pagare capital 4,950 $ 4,950 $ 650 2,500 16,000 6,200 $ 320 $ 2,500 $ 550 Ingreso Retenido Compras Costo por Ventas Descuentos Concedidos 4,320 $ 12,000 $ 3,900 $ 2,700 Gastos de seguro Cuenta de cargas imputables variacion de inventario Dividendos por pagar $ 650 $ 650 $ 12,000 $ 650 $ 650 $ 650 $ 320 $ 300 $ 320 $ 2,000 $ 2,000 $ 2,500 $ 2,500 $ 550 $ 550 $ 650 $ 650 $ 2,000 $ 2,000 $ 160 $ 160 Gastos de personal - Accionistas Gasto de Servicio Gastos de interes del pagare Intereses por Devengar $ 650 $ 550 $ 160 $ 160 $ 2,500 Otros gastos de gestion Otros Ingresos de Gestion - intereses Ventas Salario de Empleados $ 320 $ 13.5 $ 3,900 $ 2,000 $ 4,950 $ 2,000 $ 300 Salario por pagar $ 2,000 $ 2,000 $ 2,000
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